Decide if you should invest in ULIP based pension plans now or after September 1st

You may already know that IRDA is putting more restrictions on the ULIP based Pension Plans that life insurance companies are offering. I am elaborating it in this mail.

Life insurance means not only protecting the family from the risk of the breadwinner dying too early in life, but also an individual from living too long. Let us face it. Thanks to modern medicine, people are living longer, so long that our retirement years may be even more than the working years.

We may work from 25 to 60, that is about 35 years of working, and could live till 85, that is about 25 years of not working. The same applies to our spouses also. Worse, maintaining your lifestyle and health becomes extremely challenging as the day goes by. How many of us are ready to depend on our children to maintain us in our old age?

That is why pension based plans are sold by insurance companies - not to protect individuals from dying too young but to protect individuals when living too long.

I have appended below, the list of all the changes that would happen to the entire Pension based ULIP products from September 1st onwards.*

There have been a lot of concerns regarding these changes mandated by IRDA. For instance,

1. For purely a pension product, why should they have a life cover or health cover compulsorily built into it? Customers, who want to build a pension fund, unnecessarily have to pay premium for the mortality charges thus reducing the amount that goes to investment. 2. Why guarantee only 4.5% return? What good does it do to the pension fund which we want to grow at least at inflation beating rate to grow at 4.5%? Even PF / EPF pays 8 – 8.5%. Insurance companies would simply invest in debt funds (which pay at 4 - 6%) without participating in the equity market. 3. Why can't we withdraw in the middle? Why do we have to avail our investment as loan for which insurance companies can charge interest rates?

So, if you are one of those who want higher returns, no life cover, and early withdrawal option in your ULIP based pension funds, then I suggest that you CONTACT ME IMMEDIATELY by replying to this mail before these plans are gone forever!

Otherwise, just wait and watch. All the insurance companies would be closing the current ULIP based Pension products and come up with new products to comply with IRDA norms.

*Here are the changes related to ULIP based Pension Plans from September 1st onwards.

* The lock-in period for ULIPs from 3 to 5 years * All Top Up Premiums also to have insurance cover * No partial withdrawals for ULIP Pension/Annuity products allowed * ULIP pension products must be converted into an annuity. * ULIP Pension/Annuity Products to offer guarantee of 4.5%Year. This will protect the life time savings of pensioners from any adverse market fluctuations at the time of maturity. * Loan up to 40% of NAV can be sanctioned * All limited premium ULIPs, other than single premium products, shall have premium paying term of at least five years * ULIP charge structure is evenly spread out over the tenure of product. Charges on ULIPs are mandated to be evenly distributed during the lock-in period to ensure that high front-ending of expenses is eliminated. * The pension product should be sold either with life cover or health cover * For policies < 10 yrs, maximum of only 3% p.a. can be levied as total charges * For policies > 10 yrs, maximum of only 2.25% p.a. can be levied as total charg

NCB stands for ‘No Claim Bonus’. This is represented in %. It is a discount offered by insurance company upon renewal for not making any claim on the insurance. As a reward for being a safe driver, when you renew your policy, the insurance company gives this discount on your premium.

Let us say you buy a car for the first time. You do not get any discount. Upon completion of first year (and you do not have any claim), the insurance company gives 20% discount on your first time renewal. During 2nd year, this discount goes up by 5%, 3rd year by another 10%, 4th year another 10% and finally during 5th year, it reaches the maximum of 50%. So, if you have not had any claim for 5 consecutive years, you can get 50% discount on the premium paid for the own damage portion (not the 3rd party liability part).

To avail this bonus, you have to renew the policy in a timely manner, that is, within 90 days of expiry of your current policy. Also, if you get involved in an accident and make an insurance claim, the NCB% comes to 0% the next year. In other words, no discount is given if you make a claim. You need start earning from zero again.

The NCB% enjoyed for one car is transferable to another car. Let us say, your car has become 8 years old and that you would like to sell your old car and buy a new car. You can apply the NCB% that you may have on your old car policy on your new car.

NCB% is also transferable between insurance companies. So, if you have 35% NCB in your current insurance company, you can get the same % discount from another insurance company also should you decide to change your insurance company.

Check the NCB% mentioned in your policy document today and work towards making it 50%.

I would like to share my experience on "how important it is to keep our old insurance policies".

We generally throw away the expired policies (be it car, health, or property) as soon as the current year renewal is done. I am no exception. I realized the hard way how important it is to keep older policies and not throw them out.

My father has his health insurance with a well-known insurance company for over 15 years. He had to undergo some treatment last month which required hospitalization.

I had approached the Insurance Department of the hospital and submitted the current insurance policy and other required information. The hospital had sent the information to the Third Party Administrator (TPA) of the insurance company seeking pre-approval.

By God's grace, my dad is a healthy person and had never made a claim on his medical insurance for about a decade. So, I was sure that the TPA would pre-approve my dad's 'about to undergo' surgery with no issues.

To my surprise, the TPA has asked to furnish the past 10 year's policy copies. Worse, we did not have any of the previous year's policies. By then, it was friday evening and the insurance company did not work on Saturday and Sunday. My dad was scheduled to undergo the surgery on Saturday. I had to pay a large sum to the hospital before they would agree to proceed with the surgery.

I had to wait till Monday to call the insurance company. To make the long story short, it took me 10 days to obtain the older policies from the insurance company and produce that to the TPA in order to get the claims to go through.

Life Insurance policies are a means to protect the family from financial burden that could arise in the event of the death of the earning member. Life insurance is also used as a means of savings in addition to life cover; means to plan for retirement - so that the family starts to get money back from the insurance company after retirement. a means to meet the planned expenses of future - For example, children's college education, marriage expenses, etc., with tax benefits. We, at Easyinsuranceindia.com, offer you the easiest way to Compare and buy popular life insurance policies from leading insurance companies which deals with money back policies (endowment policies), retirement policies, child education policies, pure life policies, marriage policies, ULIP.